By Aidan Gregory
March 25 - (The Insurer) - Belgian insurer Ageas has a second opportunity to expand in the UK P&C market by acquiring personal lines carrier eSure following two failed bids for Direct Line Group last year, according to market sources.
The sale of UK home and motor insurer eSure by Bain Capital offers a small group of trade buyers, including Ageas, the opportunity to grab a bigger slice of the UK personal lines market following Aviva’s victory in the contest to acquire Direct Line in December.
According to Reuters, Ageas has retained advisers to explore a bid for eSure, while larger rival Allianz is actively working on its own bid for the UK insurer, which is expected to be worth around 1 billion pounds. An auction for eSure is expected to proceed in the coming weeks, subject to market conditions, Reuters reported.
Esure referred requests for comment to Bain. Bain, Ageas and Allianz declined to comment.
Ageas is seen as the frontrunner to acquire eSure, according to well-placed banking sources with knowledge of the talks. Allianz already holds a major UK personal lines platform through its ownership of LV=, which it acquired in 2020.
Banking sources close to Ageas said that the Belgian insurer’s appetite for increasing its share in UK personal lines remains undiminished, despite having two bids for Direct Line rejected last year.
Direct Line was subsequently acquired by Aviva in December for 3.7 billion pounds. The deal will create a leading UK P&C insurer with around a fifth of the home and motor insurance markets. Direct Line’s shareholders approved the takeover this week and Aviva is currently seeking competition approvals from regulators.
The swoop for Direct Line by Aviva presents a clear challenge to the market’s other players, and there is strong logic for further consolidation, particularly in UK motor where trading conditions have deteriorated significantly due to rampant social inflation since the pandemic.
Ageas sees the UK as a “key part” of its overall growth plans, but the group is focused on making sure that any asset it acquires brings with it significant synergies and capital benefits, according to one of the sources. The company currently has around 2,600 staff in the UK selling home, motor, pet and travel insurance, with its head office in Eastleigh, Hampshire.
A second source close to the eSure process said that the challenging market conditions in UK personal lines meant that an IPO of eSure was effectively impossible, and that Bain’s exit was expected to proceed through a trade sale to one of a handful of industry buyers, including Ageas and Allianz.
The source added that Bain was a “motivated seller”, and there is optimism that a deal will materialise this year, although the bidding process will be “disciplined” when it comes to price.
An insurance equity analyst said that eSure was effectively the last remaining M&A target left in UK personal lines, which would give Ageas the UK motor platform it has been seeking and significant benefits in terms of capital diversification and cross selling.
In December Ageas struck a 20-year partnership with Saga, the UK insurer focused on products for the over 50s, agreeing to acquire its underwriting business.
At the time, Ageas CEO Hans De Cuyper said that the Saga deal “perfectly aligns” with the Belgian company’s Elevate27 strategy launched in September last year. Under its current plan, Ageas has committed to building out its European non-life business and boosting its capital diversification.
Founded in 2000 by Peter Wood, the insurance executive who launched Direct Line for Royal Bank of Scotland, eSure was acquired by Bain Capital for 1.2 billion pounds in 2018 and delisted from the London Stock Exchange.
The company's recent financials show the rough ride that the UK P&C sector has been through in recent years, with carriers being forced to aggressively hike prices to restore underwriting profitability.
In the first half of its 2024 financial year, eSure made an underwriting profit of 540.5 million pounds, up 17% from the same period in 2023. However, the number of policies in force fell 12.4% to 1.97 million across the same period as price hikes drove customers away.
The company said in August it was “on track” to restore profitability in 2024 following a loss after tax of 60.1 million pounds in 2023 and a combined ratio of 102.5% because of the poor market conditions in the wake of the pandemic.
Under Bain’s ownership, eSure has decommissioned its legacy technology and migrated all its policies and claims on to one new integrated platform. More than 90% of eSure’s customers purchase policies through price comparison websites, according to the company.
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